Webinar: Correcting Your Spend Vision with Visibility

Q&A Session Responses, March 4, 2010

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Q:  What do you mean by data enrichment?

 


A: While alternatives are possible, Spend Analysis or Spend Visibility solutions usually contain two components:
1) an analytics reporting engine that serves as the spend data warehouse and
2) data enrichment provided via technolgy, as a service, or through a combination of the two.  The term 'data enrichment' encompasses two basic areas including commodity classifications to provide better visibility into what you are buying, and supplier enrichment to gain improved visibility into from whom you are buying.


Answered by Ken Miklos, Ariba
kmiklos@ariba.com

 

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Q: Influencing CFO's/CIO/CPO's that an ERP-based Spend database is really not procurement Spend Analysis is one of the biggest hurdles. What do you see as the primary differences between the two?

 



A: First, you need to articulate the difference between a database of data vs. an organized approach of information that was data and has now been classified, cleansed and enriched. This is the key differentiator!

Second, this ‘clean’ data is now your foundation for all strategic sourcing activities.   It provides an opportunity to assess each category, suppliers, contracts, terms, etc and set up your strategic sourcing plans. 
Lastly, the sourcing plans are utilized within sourcing and with the various stakeholders to find even more opportunity using demand management and lean techniques, and working with suppliers for better relationships and efficiencies.

Answered by Mickey North Rizza,
AMR Research

 

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Q: Can you further explain how spend visibility reduces maverick spend?

 


A: Once you have identified the spend with the analytics solution and drill into it, maverick spend will show up within each category and by supplier. Once this is identified you can review the buy, supplier and also why the decision was made. It is then that you can understand the behavior and take the appropriate action internally to address it.

 


Answered by Mickey North Rizza, AMR Research

 

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Q: Where do we start data cleansing for a procurement organization that has been existing for decades but is now looking at spend analysis as a greenfield area?

 


A: For buyers investigating potential applications, we recommend the following:

- Understand the business problem that needs to be solved.

- Know your short and long range term goals.

- Collaborate with IT on the systems and strategies for implementation and ongoing use.

- Consult with your analyst advisory team on best practices and vendors.

- Ask each vendor for references.

- Prototype several applications before selection.


Answered by Mickey North Rizza, AMR Research

 

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Q: James, how important was it to  have senior organisational support for the Spend Vis project and a mandate to  impact a wider scope of expenditure?  What was the balance between 'authority to  act' and relying on influencing senior  stakeholders?

 

A: It was important to  have buy-in from the senior stakeholders principally in Supply Chain and IT,  which we secured from the Councils comprising the senior leadership of each  function.  The program was more weighted towards influencing stakeholders at all  levels as that is the nature of our organizational culture (as opposed to  mandating).  For the newer areas that we wanted to impact, the purchasing teams  (category managers etc.) would still have to gain buy-in for their project, but  could do so armed with proper information for their category.  We found that in  several areas of indirect spend, having this data opened doors by providing  information that senior leadership in those functions previously did not have  access to (in a consolidated form).  In some organizations, however, a more  formal and structured approach might be more appropriate than it has been in  ours.

 

Answered by James Mortimer, Rexam PLC

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Q: What % of your spend was  misclassified to an incorrect UNSPSC code and how did you clean that  data?

 

A: We did not measure this  exactly but I would estimate that we identified approximately 10% of  misclassified data.  The majority of this was from legacy ERP systems with poor  detail within the system, or where we had very specific direct material buy  categories that we wanted to classify differently to the UNSPSC that Ariba had  classified them.  We are still continuously reviewing and cleaning the data as  we move forwards.


Answered by James Mortimer, Rexam PLC

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Q: I think you said you used  UNSPSC as the common coding. How accurate is enrichment? Do you use mapping  tables from ERP code or is enrichment based on invoice  description?


A: We felt that overall  the enrichment was accurate – see above for additional comments.  Ariba used a  few fields to classify invoices to UNSPSC , including ERP commodity and invoice  description.


Answered by James Mortimer, Rexam PLC

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Q: To what level was your Finance  organization involved in your spend visibility efforts?  Closely aligned,  supported or independantly viewed?


A: Our finance organization was not a key part of the implementation as we did not prioritize having a close tie with our financial systems at this point. As we go forward, we are working on some efforts to align spend visibility reporting more closely to our financial reporting.

 

Answered by James Mortimer, Rexam PLC

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